Foxmayer Case Study
A Major Failed ERP Implementation—FoxMeyer Drug
Mohamed Mohamoud and Jing Lei
Table of Contents
• Case Study: FoxMeyer Drug
o Background of FoxMeyer
o Implementation of ERP and the Selection of SAP R/3
o Bankruptcy Nightmare
o What exactly went wrong?
o Lessons from Failure
o Conclusion
• References
• Appendix
Case Study: FoxMeyer Drug
Background of FoxMeyer
Business
FoxMeyer Drug, a holding company in the health care services industry, with 2700 employees in 23 union and non-union locations throughout the US and Canada. In December 1995, FoxMeyer Drug was a $5 billion-a-year company, one of the leaders among distributors of pharmaceuticals.
The business of FoxMeyer included the following: 1. Distribute a full line of pharmaceutical products and health and beauty aids to chain stores, independent drug stores, hospitals, and other health care facilities. In other words, FoxMeyer’s customers were retailers and dispensers. 2. Provide managed care and information-based services to health care facilities, pharmacies and physicians. 3. Conduct business in franchising variety stores and the franchising and operation of crafts stores, and wholesale distribution of products to those stores.
Prior Information System
Prior to adoption of SAP, FoxMeyer had three linked data processing centers. Their old system involved customers filling out electronic orders, which were sent to one of their three data processing centers. Orders were filled manually and packaged within 24 hours. The company had recently completed a national distribution center with multiple carousels and automated picking, with the capability of tracking inventory to secondary locations.
Implementation of ERP and the Selection of SAP R/3
Driving Factors
• High Growth in Health Care
FoxMeyer, which was more than a century old, was nearing a crossroads by the mid-'90s. Thanks to the aging of America and a
Mohamed Mohamoud and Jing Lei
Table of Contents
• Case Study: FoxMeyer Drug
o Background of FoxMeyer
o Implementation of ERP and the Selection of SAP R/3
o Bankruptcy Nightmare
o What exactly went wrong?
o Lessons from Failure
o Conclusion
• References
• Appendix
Case Study: FoxMeyer Drug
Background of FoxMeyer
Business
FoxMeyer Drug, a holding company in the health care services industry, with 2700 employees in 23 union and non-union locations throughout the US and Canada. In December 1995, FoxMeyer Drug was a $5 billion-a-year company, one of the leaders among distributors of pharmaceuticals.
The business of FoxMeyer included the following: 1. Distribute a full line of pharmaceutical products and health and beauty aids to chain stores, independent drug stores, hospitals, and other health care facilities. In other words, FoxMeyer’s customers were retailers and dispensers. 2. Provide managed care and information-based services to health care facilities, pharmacies and physicians. 3. Conduct business in franchising variety stores and the franchising and operation of crafts stores, and wholesale distribution of products to those stores.
Prior Information System
Prior to adoption of SAP, FoxMeyer had three linked data processing centers. Their old system involved customers filling out electronic orders, which were sent to one of their three data processing centers. Orders were filled manually and packaged within 24 hours. The company had recently completed a national distribution center with multiple carousels and automated picking, with the capability of tracking inventory to secondary locations.
Implementation of ERP and the Selection of SAP R/3
Driving Factors
• High Growth in Health Care
FoxMeyer, which was more than a century old, was nearing a crossroads by the mid-'90s. Thanks to the aging of America and a
References: • Computergram International “FoxMeyer Plus Two Sue Andersen for SAP Snafus”, Computergram International, July 20, 1998. • “Enterprise Resource Planning”, Wikipedia.com, April 30, 2009, http://en.wikipedia.org/wiki/Enterprise_resource_planning • Jesitus, J Olson, David L. and Wu, Desheng Dash, “Enterprise Risk Management”, World Scientific, 2007 “SAP Americas”, Sap.com, March 29, 2009 • “What is ERP”,tech-faq.com , March 30, 2009, http://www.tech-faq.com/erp.shtml • Wong, Bernard and Tein, David, “Critical Success Factors for ERP Projects”, 2007 • Wheatley, Malcolm, “ERP Training Stinks - ENTERPRISE SYSTEMS”, CIO Magazine June 1, 2000